Law on Public Debt Management, Law No. 20/2017/QH14

THE NATIONAL ASSEMBLY

Law No. 20/2017/QH14 dated November 23, 2017 of the National Assembly on Public Debt Management

Pursuant to the 1992 Constitution of the Socialist Republic of Vietnam;

The National Assembly promulgates the Law on Public Debt Management.

Chapter I

GENERAL PROVISIONS

Article 1. Scope of adjustment

1. This Law sets forth public debt management, which covers the borrowing, use of loans and debt repayment and public debt management transactions.

2. For the purpose of this Law, public debts comprise government debts, sovereign-guaranteed debts, and provincial debts.

Article 2. Subject of application

This Law applies to organizations and individuals involved in the borrowing, use of loans, debt repayment and public debt management transactions.

Article 3. Interpretation of terms

For the purposes of this Law, these terms below shall be construed as follows:

1.”government debt”means a debt arising from an internal or external loan which is signed or issued in the name of the State or the Government.

2.”sovereign-guaranteed debt”means a debt arising from a loan borrowed by an enterprise or a bank for social policies guaranteed by the Government.

3.”provincial debt”means a debt arising from a loan borrowed by a People’s Committee of province.

4.”borrowing”means the process of creating debt obligations through the conclusion and performance of a loan treaty, contract or agreement (hereinafter referred to as loan agreement) or issuing debt instruments.

5.”ODA loan” (Official Development Assistance loan)means an external loan with a grant element of at least 35% (in case of conditional loan relating to procurement of goods and services as prescribed by the foreign donor) or at least 25% (in case of unconditional loan).

6.”external concessional loan”means an external loan that is extended on terms substantially more generous than market loan but its grant element does not reach the ODA grant element threshold.

7.”market loan”means a loan provided under market conditions.

8.”grant element”means a percentage of loan’s face value, reflecting the concessionality of the loan, calculated on the basis of currency, maturity, grace period, interest rate, other related fees with the discount rate equivalent to the loan interest of Vietnamese Government on the market determined when the grant element is calculated.

9.”debt instrument”refers to a bond, a treasury bill, or national bond, which gives rise to debt obligations.

10.”sovereign bond”means a debt instrument issued by a government intended for raising funds for state budget or debt restructuring.

11.”provincial bond”means a debt instrument issued by a People’s Committee of province for raising funds for local budget.

12.”sovereign-guaranteed debt” means a debt instrument issued by an enterprise or a bank for social policies and guaranteed by the Government.

13.”treasury bill”means a debt instrument issued by Vietnam State Treasury for a term of up to 52 weeks.

14.“national bond”means a bond issued by the Government intended for raising capital from citizens to build important national projects and other facilities serving production, life and infrastructure for the country.

15. “outstanding debt”means a loan that has been disbursed but remains unpaid at a certain point of time.

16.“debt service" refers to principal, interests, and other related fees that become due for a particular period.

17.“debt repayment”means the repayment of a due debt, including the repayment of principal, interests, and other related fees arising from the loan.

18.“debt restructuring”means a transaction to be used to alter the terms of the debt agreement, restructure a part or the whole of the public debt portfolio, including assignment of ownership, charge-off, write-off, debt purchase, debt extension, debt swap, or any debt restructuring transaction as per the law.

19.“on-lending”means that the Government on-lend a sum of money that it has borrowed from ODA loans or external concessional loans to a People’s Committee of province or a public sector entity.

20.”sovereign guarantee”means the Government s commitment with the lender to make the repayment of principal and interests in case of borrower’s failure to pay the due debt in full.

21.“limit on sovereign guarantee”means a maximum sum of money that the sovereign guarantees for 1 year or 5 years, being determined by actual sum of loan minus (-) principal.

22.“risks faced by public debt portfolio”means possibility of loss or public debt increase.

Article 4. Public debt classification

1. Government debts include:

a) Debts arising from issue of debt instruments by the Government;

b) Debts arising from internal and external loan agreements concluded by the Government;

c) Debts arising from central government budget’s loans borrowed from financial reserve fund of state, state funds available on State Treasury’s accounts (hereinafter referred to as state funds), or off-budget financial fund.

2. Sovereign-guaranteed debts include:

a) Debts of enterprises guaranteed by the Government;

b) Debts of banks for social policies guaranteed by the Government.

3. Provincial debts include:

a) Debts arising from issue of provincial bonds;

b) Debts arising from ODA on-lent loans, external concessional loans;

c) Debts arising from local government budget’s loans borrowed from banks for social policies, financial reserve fund of provinces, state funds, and other loans as per the law on state budget.

Article 5. Principles for public debt management

1. The state shall uniformly manage public debts and ensure that entities in connection with public debt management shall fulfill their responsibilities and exercise their power as prescribed.

2. Strictly control indicators of public debt safety, ensure a safe and sustainable national finance with macroeconomic stability.

3. Any proposal, appraisal, and approval for a borrowing policy, negotiation and conclusion of loan agreement, issue of debt instruments, or allocation and use of loans must be carried out with proper purposes and effectiveness. A loan granted for financing budget deficit is only used for development investment, not recurrent expenditures.

4. A borrower, end borrower, or sovereign-guaranteed borrower shall discharge obligations tied to a loan, an on-lent loan or a sovereign-guaranteed loan respectively fully and on schedule. An ODA on-lent loan, external concessional loan, or sovereign-guaranteed loan may not be converted into allocated capital of state budget.

5. Ensure that any public debt is calculated accurately and sufficiently; ensure the transparency in public debt management associated with responsibilities of relevant entities in public debt management.

Article 6. State management of public debts

1. Promulgate and implement legislative documents on public debt management.

2. Formulate and implement programs, plans, solutions, and policies on public debt management.

3. Perform public debt management, including proposal, appraisal, and approval for borrowing policies; negotiation and conclusion of loan agreements; issue of debt instruments, allocation and use of loans, debt repayment and public debt management transactions.

4. Monitor and provide information about public debt management and use, and assess effectiveness thereof.

5. Inspect and audit the observance of the law on public debt management.

6. Give commendation, take actions against violations, and handle complaints and denunciation in terms of public debt management.

Article 7. Supervision of public debt management

1. The National Assembly and each People’s Council shall supervise the implementation of regulations and laws on public debt management as prescribed in the Law on supervisory activities of the National Assembly and People’s Councils and relevant law provisions.

2. Vietnamese Fatherland Front shall supervise the implementation of regulations and laws on public debt management in accordance with regulations of Vietnamese Fatherland Front and relevant law provisions.

Article 8. Prohibited acts in public debt management

1. Borrowing, lending, and guaranteeing loans ultra vires, without approval of competent authorities, or exceeding the limits decided by competent authorities.

2. Using loans for improper purposes or by improper persons, exceeding the prescribed limits; or failure to make debt repayment properly.

3. Taking advantage of one’s position to appropriate or embezzle in public debt management and use.

4. Failing to comply with regulations on public debt management; causing loss or waste of loans due to irresponsibility.

5. Failing to provide or provide insufficient, untimely, and inaccurate information on public debts as per the law.

6. Obstructing the supervision, inspection, audit and actions against violations of laws and regulations on public debt management.

Article 9. Actions against violations of regulations and laws on public debt management

1. The head of an entity shall be held accountable for any violation against regulations and laws on public debt management committed by such entity. Depending on nature and severity of the violation, the head of such entity shall be disciplined or face a criminal prosecution as per the law.

2. Any entity violating regulations and laws on public debt management shall, depending on his/her/its nature and severity of the violation, be disciplined, incur an administrative penalty or face a criminal prosecution, and make compensation in case of causing damage as per the law.

Chapter II

TASKS AND POWERS IN PUBLIC DEBT MANAGEMENT

Article 10. Tasks and powers of the National Assembly

1. Ratify or adjust 5-year public debt borrowing and repayment plans.

2. Ratify or adjust annual total borrowing and repayment amounts of state budget.

Article 11. Tasks and powers of the Standing Committee of National Assembly

1. Offer opinions about schemes, projects and reports on public debt management submitted by the Government.

2. Decide the issue of national bonds.

Article 12. Tasks and powers of the State President

1. Decide negotiation, conclusion, ratification and adjustments to ODA or concessional loan agreements in the name of the State as prescribed in the Law on treaties.

2. Require the negotiation, conclusion, ratification and adjustments to ODA or concessional loan agreements in the name of the State as deemed necessary.

Article 13. Tasks and powers of the Government

1. Perform the unified state management of public debts.

2. Request the National Assembly to:

a) Ratify or adjust 5-year public borrowing and repayment plans;

b) Ratify or adjust annual total borrowing and repayment amounts of state budget.

3. Request the Standing Committee of National Assembly to:

a) Offer opinions about schemes, projects and reports on public debt management;

b) Decide the issue of national bonds.

4. Decide annual limits on loans to be on-lent and Sovereign-guaranteed loans.

5. Approve schemes for issuing sovereign bonds in the international capital market.

6. Report on public debts and indicators of public debt safety to the National Assembly, the Standing Committee of National Assembly, and the State President.

Article 14. Tasks and powers of the Prime Minister

1. Decide 3-year public debt management programs.

2. Decide annual public debt borrowing and repayment plans.

3. Decide the issues of sovereign bonds in the international capital market in accordance with the respective scheme approved by the Government.

4. Decide the use of accumulation fund for debt repayment (hereinafter referred to as debt repayment fund) to resolve problems associated with on-lending and sovereign guarantees.

5. Approve schemes for debt restructuring.

6. Approve programs and projects using ODA loans or external concessional loans.

7. Decide and direct the negotiation, conclusion, ratification, and adjustments of external loan agreement in the name of the Government.

8. Decide ODA on-lent loans or external concessional loans for every program or project.

9. Decide sovereign guarantees for every program or project.

Article 15. Tasks and powers of ministries and ministerial-level agencies

1. The Ministry of Finance shall assist the Government in performing the uniform state management of public debts and have the following tasks and powers:

a) Formulate a legislative document on public debt management, and then promulgate it within competence or request a competent authority to promulgate it;

b) Make a 5-year public borrowing and repayment plan or an annual report on borrowing and repayment amount of state budget and submit it to the Government; the Government shall then submit it to the Government for ratification or adjustments;

c) Make a plan for issue of national bonds and submit it to the Government; the Government shall then submit it to the Standing Committee of National Assembly for ratification;

d) Make a plan for annual limits on loans to be on-lent and Sovereign-guaranteed loans and a scheme for issuing sovereign bonds in the international capital market and submit them to the Government for approval;

dd) Make the following plans: 3-year public debt management program, annual public borrowing and repayment plans, issues of sovereign bonds in international capital market, use of debt repayment fund to resolve problems associated with on-lending and sovereign guarantees, schemes for debt restructuring, negotiation, conclusion, approval and adjustments of external loan agreements in the name of the Government, on-lending, issue of sovereign guarantees for every program/project, and then submit them to the Government for approval;

e) Make a plan for negotiation, conclusion, approval and adjustments of ODA loan agreements or external concessional loans in the name of the State and submit it to Prime Minister, the Prime Minister shall then submit it to the State President for approval;

g) Raise funds, issue debt instruments of the Government in the domestic and international capital market; take charge of negotiating and concluding trade loan agreements, framework agreements, agreements on ODA loans and external concessional loans in the name of the State and the Government;

h) Allocate capital to investment programs and projects financed by borrowed capital of the Government as per the law on state budget;

i) On-lend ODA loans or external concessional loans as prescribed by the Prime Minister;

k) Pay principal, interests, and other related fees associated with the Government’s debts;

l) Issue and manage sovereign guarantees according to decisions of the Prime Minister;

m) Manage the debt repayment fund;

n) Manage debt portfolio, implement schemes for debt restructuring and responses to risks according to decisions of the Prime Minister;

o) Do accounting for government debts; release statistics on, report and publish information about public debts as per the law;

p) Inspect and examine the observance of the law on public debt management.

2. Ministries and ministerial-level agencies cooperate with the Ministry of Finance in performing the roles of regulatory agencies in public debts as assigned by the Government.

Article 16. Tasks and powers of People s Councils of provinces

The People’s Council of a province shall:

1. Decide and adjust annual and 5-year borrowing and repayment plans of the province as prescribed in this Law and regulations and laws on state budget.

2. Decide a list of investment projects funded by borrowed capital of the province as per the law; and approve a scheme for issuing municipal bonds.

3. Oversee the borrowing, on-lending, issues of municipal bonds, use of loans and repayment thereof of the province.

Article 17. Tasks and powers of People s Committees of provinces

The People’s Committee of a province shall:

1. Make an annual or a 5-year borrowing and repayment plan of the province and submit it to People’s Council of province for approval.

2. Make a 3-year debt management program of the province and send it to the Ministry of Finance; the Ministry of Finance shall then forward it to the Prime Minister.

3. Issue provincial bonds, apply for loans borrowed from other lawful financial sources, ODA on-lent loans, and external concessional loans as prescribed in this Law.

4. Inspect the management and use of loans of the province.

5. Ensure that state budget is enough to make repayment in full and on schedule.

6. Provide explanation and report on mobilization, allocation, management, and use of loans and repayment thereof of the province to competent authorities.

Article 18. Tasks and powers of State Audit Office

Audit operations in connection with public debt management and use, including mobilization, allocation, and use of loans and repayment thereof, loans to be on-lent, and sovereign guarantees; report and publish audit results as prescribed in the Law on State Audit Office of Vietnam.

Article 19. Responsibilities of (end) borrowers or guaranteed borrowers

1. Use loans in an effective manner, with proper purposes, and intra vires as prescribed in this Law.

2. Fully fulfill obligations arising out of loan agreements, issues of debt instruments, on-lent loan agreements, or sovereign guarantees.

3. Provide information and reports as prescribed in regulations and laws on public debt management.

4. If an/a (end) borrower or guaranteed borrower commits a violation against the law, its head shall incur personal liability for such violation.

Article 20. Responsibilities of entities relating to public debt management

1. The Government, Prime Minister, Ministries, ministerial-level agencies, People’s Committees of province shall take legal responsibility for their performance of tasks and powers as assigned in public debt management.

2. If an entity relating to public debt management commits a violation against the law, its head shall incur personal liability for such violation.

3. Each entity relating to public debt management shall provide explanation and report on proposals, appraisal, and approval for borrowing policies; negotiation and conclusion of loan agreements; issue of debt instruments, allocation and use of loans, debt repayment and public debt management transactions to competent authorities.

Chapter III

INDICATORS OF PUBLIC DEBT SAFETY, 5-YEAR PUBLIC BORROWING AND REPAYMENT PLANS, 3-YEAR PUBLIC DEBT MANAGEMENT PROGRAMS, ANNUAL PUBLIC BORROWING AND REPAYMENT PLANS

Article 21. Indicators of public debt safety

1. Indicators of public debt safety mean a system of indicators setting forth public debt ceiling and threshold ratified by the National Assembly.

2. Indicators of public debt safety consist of:

a) Public debt-to-GDP ratio;

b) Government debt-to-GDP ratio;

c) The ratio of debt service of the Government (excluding on-lent loans) to total budget revenues;

d) External debt-to- GDP ratio;

dd) External debt service-to-exports ratio. export turnover.

Article 22. 5-year public borrowing and repayment plans

1. A 5-year public borrowing and repayment plan shall contain:

a) Indicators of public debt safety;

b) Total loans and debt service of central government budget and local government budget; limits on loans to be on-lent and Sovereign-guaranteed loans;

c) Public debt management solutions.

2. A report on 5-year public borrowing and repayment plan submitted to the National Assembly for ratification shall at least contain:

a) Evaluate the control of indicators of public debt safety, objectives for and solutions for previous 5-year public borrowing and repayment plan; evaluate results, limitations, reasons thereof, and lessons learned;

b) Objectives and indicators of public debt safety; orientations and solutions for public debt management with a view to ensure a safe and sustainable national finance for the subsequent 5-year period;

c) Total loans and debt service of the Government, including loans to be on-lent, total loans and debt service of provinces, limits on Sovereign-guaranteed loans for the subsequent 5-year period;

d) Essential solutions for carrying out the plan.

3. The People’s Committee of province makes 5-year borrowing and repayment plan of the province, including implementation of the previous 5-year borrowing and repayment plan; evaluation of results, limitations, reasons thereof and lessons learned; orientations and solutions for debt management, total loans and debt service of the provinces for the subsequent 5-year period, and then submit to People s Council of province for consultation before sending it to the Ministry of Finance for consolidating it to the 5-year borrowing and repayment plan.

4. The Ministry of Finance shall gather 5-year borrowing and repayment plans of provinces to make a consolidated plan, and send it to the Government; the Government shall then forward it to the National Assembly for ratification.

5. Procedures for preparing and approving a 5-year financial plan shall apply to the preparing and approving of 5-year public borrowing and repayment plan as prescribed in the Law on State budget.

6. In case of fluctuations in economic growth, inflation, exchange rates, interest rates, or budget deficit or failure to raise a given fund as approved resulting in indicators of public debt safety reaching thresholds, the Government shall adopt appropriate solutions to ensure that indicators of public debt safety will not exceed the ceilings prescribed by the National Assembly. The Government shall make an adjusted plan, as deemed necessary, and submit it to the National Assembly for consideration.

Article 23. 3-year public debt management programs

1. Annually, a 3-year public debt management program shall be made in conjunction with a 3-year financial plan as prescribed in the Law on State budget.

2. A 3-year public debt management program shall at least contain:

a) Evaluation of the progress of public debt management in the current year;

b) Estimates of total loans and debt service of the Government and of provinces, and limits on Sovereign-guaranteed loan of the planning year and the subsequent 2 years;

c) Forecasts of domestic and international capital market; borrowing source capacity and structure; loan and debt service plans; expenses associated with raising funds and possible risks in the planning year and the subsequent 2 years;

d) Essential solutions for carrying out the program.

3. The People’s Committee of province shall direct Department of Finance to formulate and include a 3-year debt management program of province in the 3-year financial plan of province, and then send it to the Ministry of Finance for including them in the 3-year public debt management program.

4. The Ministry of Finance shall formulate and submit a 3-year public debt management program to the Prime Minister for approval.

Article 24. Annual public borrowing and repayment plans

1. An annual public borrowing and repayment plan shall contain:

a) An annual borrowing and repayment plan of the Government;

b) Annual borrowing and repayment plans of provinces;

c) Annual limits on loans to be on-lent and Sovereign-guaranteed loans.

2. An annual borrowing and repayment plan of the Government shall be done in compliance with the following regulations:

a) The annual borrowing and repayment plan of the Government is made to perform tasks associated with finance, budget, and public investment in the planning year as approved by competent authorities;

b) The annual borrowing and repayment plan of the Government shall contain: loans for financing central budget deficit, repayment of principal, on-lent loans and debt restructuring; debt service, repayment of on-lent loans; loan restructuring and repayment sources;

c) Annually, the Ministry of Finance shall make a borrowing and repayment plan of the Government at the same with the state budget estimates.

3. An annual borrowing and repayment plan of the province shall be done in compliance with the following regulations:

a) The annual borrowing and repayment plan of the province is made to perform tasks associated with finance, budget, and public investment of the province in the planning year as approved by competent authorities;

b) The annual borrowing and repayment plan of the province shall contain: loans for financing local budget deficit, repayment of principal, repayment of on-lent loans; loan restructuring and repayment sources;

c) Annually, the People’s Committee of province shall make a borrowing and repayment plan of the province at the same with the state budget estimates, and then send it to People’s Council of province for consultation; and then forward it to the Ministry of Finance for consolidation.

4. Annual limits on Sovereign-guaranteed loans shall be done in compliance with the following regulations:

a) Annual Sovereign-guaranteed loan limit is determined provided that the growth rate of outstanding debt ofsovereign guarantee does not exceed the growth rate of GDP of the previous year and withinSovereign-guaranteed loan limit for the 5-year period ratified by the National Assembly;

b) According to the need and capacity of raising fund and the Sovereign-guaranteed loan limit for a 5-year period ratified by the National Assembly, the Ministry of Finance shall submit the guaranteed loan limit of the planning year to the Government for approval.

5. The Ministry of Finance shall make a report on total loans and debt service of central budget and include the total loans and debt service of local budget in the state budget estimates, and then send it to the Government; the Government shall then forward it to the National Assembly for ratification.

6. According to annual total loans and debt service of state budget ratified by the National Assembly, limits on loans to be on-lent, Sovereign-guaranteed loans, the Ministry of Finance shall make an annual public borrowing and repayment plan and submit it to the Prime Minister for approval.

7. According to the annual public borrowing and repayment plan approved by the Prime Minister, Ministries, regulatory bodies, and local governments shall carry out the plan within its scope and approved limits.

Chapter IV

MANAGEMENT OF THE GOVERNMENT LOANS AND REPAYMENT THEREOF

Article 25. Purposes of the Government s loans

1. Financing budget deficit for development investment but not recurrent expenditures.

2. Financing temporary central budget deficit and ensure the liquidity of sovereign bond market.

3. Paying due principal and restructuring Government debts.

4. Grant ODA on-lent loans or external concessional loans to People’s Committees of provinces, public sector entities and enterprises.

Article 26. Forms of Government loans

1. Forms of Government loans include:

a) Issues of debt instruments;

b) Conclusion of loan agreements.

2. The Government may borrow in local and foreign currencies, precious metal or goods of local or foreign currency equivalence.

Article 27. Issues of debt instruments in domestic capital market

1. Debt instruments of the Government include:

a) Sovereign bonds;

b) Treasury bills;

c) National bonds.

2. According to an annual public borrowing and repayment plan, the Ministry of Finance shall issue debt instruments of the Government.

3. The process for issuing debt instruments shall be through bidding, underwriting or private placement.

4. Total the Government loans shall be included in the central budget. The Government must set aside an enough sum of money to repay principal, interests, and other related expenses on a due debt.

5. The Government sets forth issues, registration, deposit, listing and dealings of debt instruments of the Government in the securities market.

Article 28. Issues of sovereign bonds in the international capital market

1. The Government issues sovereign bonds in the international capital market to finance central budget deficit for development investment as prescribed in the Law on State budget and debt structuring of the Government.

2. According to annual state budget estimates and annual public borrowing and repayment plan, the Ministry of Finance shall submit a scheme for issuing sovereign bonds in international capital market to the Government for approval.

3. A scheme for issuing sovereign bonds in international capital market shall at least contain:

a) Necessity of issues of sovereign bonds in the international capital market;

b) Demand for and capacity to raise funds, domestic macro economy, Vietnam’s credit rating and international capital market;

c) Types of processes for bond issuance, amount, terms, expected interest rates, currency, and market;

d) A plan for using raised capital;

dd) Evaluation of loan efficiency and impact of the new loan on public debts, and indicators of public debt safety.

4. The Ministry of Finance shall implement the scheme approved by the Government, the decision of the Prime Minister on issue of sovereign bonds in the international capital market.

Article 29. ODA loans, external concessional loans

1. Ministries, regulatory bodies, and local governments shall make programs and projects for using ODA loans or external concessional loans as prescribed in this Law and relevant law provisions.

2. A program/project for using ODA loans or external concessional loans shall at least contain:

a) Necessity, objectives, and scope of the program/project;

b) Expected total sources of funds and proportion thereof, including external loans and reciprocal capital;

c) Loan amount, lender and loan terms and conditions (if any);

d) Proposed domestically operated financial mechanism; repayment source balance plan;

dd) Expected results of the program/project.

3. The Ministry of Finance shall determine grant element, evaluation of impact of new loan on indicators of public debt safety, and domestically operated financial mechanism, and then have them and the program/project for using ODA loans or external concessional loans considered by the Prime Minister for approval.

4. According to the approval of the Prime Minister, the governing body shall prepare a pre-feasibility study report or a report on program/project for using ODA loans or external concessional loans, and then submit it to the authority competent to decide investment policies as per the law.

5. According to the investment policies on program/project for using ODA loans or external concessional loans approved by competent authority, the government body shall prepare a feasibility study report and then submit it to the authority competent to decide investment as per the law.

6. The State President, the Government and the Prime Minister has the power to negotiate and conclude an ODA or external concessional loan agreement as follows:

a) The Government shall submit a loan agreement in the form of international treaty in the name of the State to the State President for negotiation, conclusion, and ratification;

b) The Prime Minister shall negotiate and conclude a loan agreement in the name of the Government.

7. The conclusion of an ODA loan or external concessional loan agreement is considered qualified when the following conditions are fulfilled:

a) all of investment procedures are completed as per the laws; and

b) the ODA loan or external concessional loan agreement has been approved by the competent authority.

8. ODA loans or external concessional loans must be allocated and used closely and effectively in the following rules:

a) Give grants to programs and projects eligible for state funding;

b) Given on-lent loans to People’s Committees of provinces, public sector entities, and enterprises.

9. The Government provides guidelines for management of ODA loans and external concessional loans.

Article 30. Other domestic loans

1. Other domestic loans of the Government shall be applied in accordance with the decision of the competent authority or loan agreement, including:

a) Loans borrowed from financial reserve fund of the State according to decisions of competent authorities in accordance with the Law on State budget;

b) Loans borrowed from off-budget financial fund, state funds, loans borrowed from financial institutions or credit institutions in accordance with loan agreement.

2. The loan agreement shall be made in the form of a loan contract, at least containing: loan amount, loan term, interest rate and other charges associated with the loan, options for repayment method, repayment period, extension, and late payment fines (if any), rights and responsibilities of contractual parties, other terms and conditions relating to the loan.

3. According to the annual state budget estimates ratified by the National Assembly and the annual public borrowing and repayment plan approved by the Prime Minister, the Ministry of Finance shall:

a) Request the Prime Minister to apply for a loan borrowed from financial reserve fund of the State to finance the budget deficit as prescribed in the Law on State budget. The Ministry of Finance shall decide a loan with the repayment plan within the year;

b) Decide a loan borrowed from state funds as prescribed in the Law on State budget; or a loan borrowed from debt repayment fund as prescribed in Clause 5 Article 56 of this Law;

c) Negotiate and conclude a loan agreement with the off-budget financial fund, a financial institution, or a credit institution.

Article 31. Use of the Government s loans

1. If a program/project is eligible for state funding, the procedures below shall be followed:

a) Expenditures of the program/project eligible for funding from central budget shall be included in expenditure estimate of central budget, which shall then be submitted to the National Assembly for ratification;

b) Dedicated additional loans for local budget shall be included in expenditure estimate of local budget, which shall then be submitted to the National Assembly for ratification;

c) Expenditures of the program/project eligible for funding from local budget shall be included in the expenditure estimate of local budget, which shall then be submitted to the People’s Council of province for ratification.

2. In case of end borrowers, the Ministry of Finance shall appraise and conclude or authorize a bank for social policies/credit institution to appraise and conclude an on-lent loan contract as prescribed in this Law.

Article 32. Repayment of government debts

1. The Government shall set aside an amount in central budget to repay government debts. The National Assembly shall ratify the new loan amount to pay off the principal in the total loan of annual state budget.

2. The People’s Committee of province shall set aside an amount in local budget to pay off ODA on-lent loans and external concessional loans in full and on schedule.

3. The Ministry of Finance and an intermediary borrower authorized by the Ministry of Finance must recover such an amount of principal, interests, and other related fees associated with programs and projects for ODA on-lent loans and external concessional loans, and then deposit the amount to the debt repayment fund to ensure external loan repayment.

Chapter V

MANAGEMENT OF ODA ON-LENT LOANS AND EXTERNAL CONCESSIONAL LOANS

Article 33. Eligible end borrowers and intermediary borrowers

1. Eligible end borrowers of ODA on-lent loans and external concessional loans include:

a) People s Committees of provinces;

b) public sector entities; and

c) enterprises.

2. Intermediary borrowers include the Ministry of Finance, banks for social policies, and credit institutions authorized to on-lend loans by the Ministry of Finance.

Article 34. Rules for on-lending

1. The Government only on-lends ODA loans or external concessional loans; the Government does not issue sovereign bonds in the international capital market or request foreign commercial loans to on-lend them.

2. The Government shall on-lend the whole or a part of ODA loans or external concessional loans to eligible end borrowers prescribed in Clause 1 Article 33 of this Law.

3. Each loan must be on-lent in transparent and effective manner, to eligible end borrowers and with proper purposes approved by competent authorities.

4. An on-lent loan amount, maturity, and grace period shall not exceed the respective items prescribed in the external loan agreement of the Government; the on-lent currency and repayment currency is the currency in which the external loan is borrowed. If the external debt is paid back in Vietnam dong, the selling exchange rate at the time of repayment disclosed by Joint Stock Commercial Bank for Foreign Trade of Vietnam, commonly referred to as Vietcombank, shall apply.

5. On-lending interest rate includes external loan interest rate, charges specified in the loan agreement, charges for management of on-lent loans and on-lent loan loss reserves.

6. The end borrower must have a feasible financial plan approved by competent authority as prescribed in Article 38 of this Law.

Article 35. On-lending methods

1. The Ministry of Finance shall on-lend a loan to the People’s Committee of province to carry out programs and projects for socio-economic development eligible for funding from local budget in compliance with the laws and regulations on state budget.

2. An intermediary borrower being bank for social policies authorized by the Ministry of Finance shall on-lend loans to enterprises or public sector entities to carry out programs and projects named in the list of preferred investments of state. In this case, the intermediary borrower will not take the credit risk.

3. An intermediary borrower being credit institution authorized by the Ministry of Finance shall on-lend loans to enterprises for business purposes. An intermediary borrower being credit institution must fulfill the following conditions:

a) Its credit rating graded by an international credit rating agency is equal or one level lower than its national credit rating.

b) It shall take all credit risks.

Article 36. Eligibility for on-lent loans

1. A People’s Committee of province is eligible for an on-lent loan when it fulfills the following conditions:

a) it has a program/projects for socio-economic development under a mid-term public investment plan of province approved by the competent authority and investment procedures thereof have been completed as per the law;

b) the program/project mentioned in Point a of this Clause is funded by ODA loans or external concessional loans;

c) there is no debt overdue for more than 180 days associated with an ODA on-lent loan or an external concessional loan;

d) the outstanding debt of local budget at the time of applying for on-lending loans does not exceed certain amount of that as prescribed in laws and regulations on state budget; and

dd) the local budget commits to pay off the loan in full and on schedule.

2. A public sector entity is eligible for an on-lent loan when it fulfills the following conditions:

a) it has exercised financial autonomy associated with recurrent expenditures and investment expenditures and has taken its own responsibility for capital efficiency and debt repayment as per the law;

b) it has an investment project to be financed by ODA on-lent loans approved by the competent authority and has completed relevant investment procedures as per the law;

c) it has a feasible financial plan approved by competent authority as prescribed in Article 38 of this Law;

d) it has no overdue debt when an application for an on-lent loan is submitted; and

dd) the loan has been secured as per the law.

3. An enterprise is eligible for an on-lent loan when it fulfills the following conditions:

a) it has legal status, established lawfully in Vietnam and operated for at least 3 years;

b) it has an investment project to be financed by ODA on-lent loans approved by the competent authority and has completed relevant investment procedures as per the law;

c) it has a feasible financial plan approved by competent authority as prescribed in Article 38 of this Law;

d) its debt-to-equity ratio does not exceed 3 to 1 according to the last annual financial statement of the year of assessment;

dd) it has not incurred loss for the last 3 consecutive years according to the audit report, except for the loss incurred due to adoption of state policies as approved by competent authority;

e) it has no overdue debt when the application for an on-lent loan is submitted; and

g) the loan has been secured as per the law.

Article 37. Charge for managing on-lent loans, on-lent loan loss reserves

1. Charge for managing on-lent loans:

a) The charge for managing on-lent loans is 0.25 per year calculated based on on-lent outstanding debt to be paid by the end borrower;

b) The abovementioned charge is used to pay expenses associated with borrowing, management, and recovery of on-lent loans by intermediary borrower.

2. On-lent loan loss reserves:

a) The on-lent loan loss reserve is calculated according to evaluation of the end borrower’s financial situation and level of risks of each program/project provided not exceeding 1.5% per year based on the outstanding debt to be paid by the end borrower;

b) If the intermediary borrower does not take credit risk, the on-lent loan loss reserve shall be allocated to debt repayment fund. If the intermediary borrower takes all of credit risks, the on-lent loan loss reserve shall be allocated to the intermediary borrower;

c) The on-lent loan loss reserve is set aside as an allowance for external loan repayment if the end borrower fails to pay off the debt in full and on schedule.

Article 38. Assessment of on-lent loans

1. An ODA on-lent loan or external concessional loan to be given to a People’s Committee of province shall be assessed as follows:

a) The Ministry of Finance shall assess if the People’s Committee of province is eligible for on-lent loans as prescribed in Clause 1 Article 26 of this Law;

b) According to the assessment results and relevant documentation, the Ministry of Finance shall request the Prime Minister to consider giving the on-lent loan to such People’s Committee of province.

2. An ODA on-lent loan or external concessional loan to be given to a public sector entity or enterprise shall be assessed as follows:

a) The end borrower shall send the on-lent loan application and documentation on program/project to the Ministry of Finance and the intermediary borrower. The end borrower shall take responsibility for the accuracy and truthfulness of documents applied for on-lent loans;

b) The following matters shall be assessed: eligibility for on-lent loans prescribed in Clause 2 and Clause 3 Article 36 of this Law; end borrower’s financial situation; borrowing and use plan, revenues, expenses, investment efficiency and creditworthiness of the end borrower; collateral; plan for management and disposition of collateral; level of risks, risk prevention and mitigation;

c) The intermediary borrower shall assess matters prescribed in Point b of this Clause; offer opinions about creditworthiness and propose eligibilities for the on-lent loan and on-lent loan loss reserves applicable to the end borrower;

d) According to the assessment results and relevant documentation, the Ministry of Finance shall request the Prime Minister to consider giving the on-lent loan.

Article 39. On-lent loan credit risk management

1. The on-lent loan credit risk arises when the end borrower defaults on the debt obligations or fails to repay debt in full and on schedule as specified in the on-lent loan contract.

2. The risk control shall be considered on a case-by-case basis based on reasons, level of risks and creditworthiness of the end borrower.

3. Responses to assessed risks associated with on-lent loans shall be adopted in accordance with Article 55 of this Law.

4. If the end borrower still defaults on the debt despite adoption of responses to assessed risks, the Ministry of Finance shall take charge and cooperate with Ministries, regulatory bodies, and local governments in formulating a scheme for debt restructuring and submitting it to the Prime Minister for approval.

Article 40. Responsibilities of intermediary borrowers and end borrowers

1. The Ministry of Finance and intermediary borrowers shall:

a) Monitor and examine the use of on-lent loans by end borrowers;

b) Complete legal dossiers, manage and dispose of collateral and other assets tied to the loan as security pledged by the end borrower;

c) Apply necessary methods and sanctions under law to recover borrowed funds, including principals, interests, and other related fees, from end borrowers under the terms and conditions specified in on-lent loan contracts;

d) Send periodic or ad-hoc report on implementation of programs and projects financed by on-lent loans to competent authorities and take responsibility for the accuracy and truthfulness of these reports;

dd) In case of an intermediary borrower taking all of credit risks, if it fails to recover a part or the whole of borrowed fund, including principals, interests, and other related fees, after applying necessary methods and sanctions, it must repay the debt on behalf of the end borrower.

2. The end borrower must:

a) Manage and use the on-lent loan with proper purposes as approved by the competent authority;

b) Repay debts in full and on schedule under the terms and conditions specified in the on-lent loan contract. If the end borrower fails to repay debt in full and on schedule, it must observe methods and sanctions applied by the intermediary borrower to recover debts and to incur liabilities as per the law;

c) Comply with the law on mortgage and loan security methods;

d) Send periodic or ad-hoc report on implementation of programs and projects financed by on-lent loans to the Ministry of Finance, intermediary borrower, and competent authorities and take responsibility for the accuracy and truthfulness of these reports.

3. The Government provides guidelines for management of ODA on-lent loans and external concessional loans.

Chapter VI

ISSUE AND MANAGEMENT OF SOVEREIGN GUARANTEES

Article 41. Borrowers of sovereign guarantees

1. Any enterprise whose investment projects are subject to investment policy decisions of the National Assembly, the Government, or subject to investment decision of the Prime Minister as prescribed in the Law on Investment and the Law on Public Investment.

2. Any bank for social policies that have carried out state credit program.

Article 42. Policies on issue of sovereign guarantees

1. A guaranteed borrower may, according to its need, apply for issue of sovereign guarantees associated with the state credit program to the Ministry of Finance for consolidating, determining the limit on sovereign-guaranteed loan for 5 years and annually, and then submit application to the competent authority for decision.

2. According to the annual sovereign-guaranteed loan limit that has been determined, the Ministry of Finance shall request the Prime Minister to issue sovereign guarantees to every specific program/project.

Article 43. Eligibility for sovereign guarantees

1. An enterprise is eligible for a sovereign guarantee when it fulfills the following conditions:

a) it has legal status, established lawfully in Vietnam and operated for at least 3 years;

b) It has not incurred loss for the last 3 consecutive years according to the audit report, except for the loss incurred due to adoption of state policies as approved by competent authority;

c) it has no overdue debt when the application for a sovereign guarantee is submitted;

d) its debt-to-equity ratio does not exceed 3 to 1 according to the last annual financial statement of the year of assessment;

dd) The guarantee amount is within the annual guarantee limit approved by the Government;

e) it has completed investment procedures under the investment law and other relevant laws;

g) it has the financial plan assessed by the Ministry of Finance and approved by the Prime Minister;

h) its ratio of owner’s equity to total investment of the project is at least 20%. The owner’s equity will be disbursed according to time for performance.

2. A bank for social policies is eligible for a sovereign guarantee when it fulfills the following conditions:

a) It has established and operated as per the law and raised funds in accordance with its charter promulgated by the competent authority;

b) The guarantee amount is within the annual guarantee limit approved by the Government;

c) The sovereign-guaranteed loan shall be used to carry out the state credit program as prescribed by the Government.

3. When an enterprise issues sovereign-guaranteed bonds in the domestic capital market, it must both fulfill conditions prescribed in Clause 1 of this Article and obtain an application for issue of bonds as prescribed in laws on securities and relevant law provisions.

Article 44. The power to issue sovereign guarantees

1. The Ministry of Finance shall take charge and cooperate with relevant agencies in assessing applications for issue of sovereign guarantees associated with state credit program, investment project, and then send the assessment results to the Prime Minister.

2. The following matters in an application for issue of sovereign guarantee shall be assessed:

a) financial situation of the borrower;

b) Financial plan of the program/project financed by the loan and creditworthiness;

c) Terms and conditions of the sovereign-guaranteed loan;

d) Risks of the program/project associated with sovereign-guaranteed loan.

Article 45. Limit on sovereign guarantee for investment project

1. The limit on sovereign guarantees for the loan amount and bond issue for investment project is 70% of total investment as approved.

2. Apart from the sovereign-guaranteed loan prescribed in Clause 1 of this Article, the sovereign-guaranteed borrower must undertake that it may maintain sufficient sources of funds to carry out the project with total estimated investment as approved.

Article 46. Management of sovereign guarantees

1. The guaranteed borrower must pay a sum of guarantee fee depending on risk level of each program/project but not exceeding 2% of guaranteed outstanding debt. The proceed of guarantee fee may be appropriated partially for the management of sovereign guarantees.

2. The guaranteed borrower must put an asset up as collateral as prescribed in laws on security interest registration.

3. Any assignment of rights and obligations of the borrower associated with a sovereign-guaranteed loan must undertake that obligations of the guarantor remain unchanged and notified to the Ministry of Finance in advance. The assignee shall inherit all of rights and obligations associated with the guaranteed loan.

4. Any assignment of a sovereign-guaranteed loan by the guaranteed borrower must undertake that the guarantor does not incur heavier obligations, with the consent of the lender. The guaranteed borrower shall report on the assignment to the Ministry of Finance and the Ministry of Finance shall then forward it to the Prime Minister for approval.

5. Any division, consolidation, acquisition, or conversion of business entity type of the guaranteed borrower must undertake that the guarantor does not incur heavier obligations and be reported to the Ministry of Finance; the Ministry of Finance shall then forward it to the Prime Minister for approval.

6. The assignment of shares of a shareholder whose name is included in the list of shareholders holding at least 65% of shares which has been registered with the Ministry of Finance when the application for issue of sovereign guarantee has been assessed shall be reported to the Ministry of Finance, the Ministry of Finance shall then forward it to the Prime Minister for approval.

7. The assignment of project or project property after investment of the guaranteed borrower must undertake that the obligations of the guarantor are not expanded and obligations of the guaranteed borrower towards the lender and the guarantor do not change. The guaranteed borrower shall report on the assignment to the Ministry of Finance and the Ministry of Finance shall then forward it to the Prime Minister for approval.

8. The guaranteed borrower must grant security interests to ensure the repayment of loan and sovereign-guaranteed bonds in full and on schedule.

Article 47. Management of sovereign guarantee risks

1. Sovereign-guaranteed loans and bonds must be monitored for risk prevention and mitigation.

2. Any guaranteed borrower that has overdue debt arising from debt repayment fund must be supervised by the Ministry of Finance as prescribed by the Government.

3. The sovereign guarantee risk prevention and mitigation shall be done in accordance with Article 55 of this Law.

Article 48. Responsibilities of guarantors, borrowers, Ministries, ministerial-level agencies, and People’s Committees of provinces

1. The Ministry of Finance acting as the guarantor shall:

a) Assess policies and applications for issue of sovereign guarantees and issue sovereign guarantees;

b) Negotiate, offer opinions about loan agreement and bond issue plans in consideration of the application submitted by the guaranteed borrower;

c) Supervise the use of loan; make a proposal for measures and sanctions when a borrower faces difficulty in debt service, and send it to the Prime Minister for approval;

d) Fulfill the guarantor s payment liability arising from the letter of guarantee when a guaranteed borrower defaults on the debt;

dd) Apply necessary measures and sanctions as per the law to recover debts and expenses arising from the debt repayment on behalf of the borrower;

e) Consolidate and report on the issue and management of sovereign guarantees to competent authorities.

2. The guaranteed borrower must:

a) Provide adequate documentation and take responsibility for accuracy and truthfulness of documentation furnished to the Ministry of Finance;

b) Preside over negotiation of loan agreement or bond issue;

c) Manage and use the sovereign-guaranteed loan with proper purposes as approved by the competent authority;

d) Discharge debt obligations to the lender in full;

dd) Fulfill obligations to guarantor adequately. When failing to repay debts in full and on schedule, the borrower must abide by measures and sanctions applied by the guarantor; and take legal responsibility in case of debt default;

e) Provide information about the performance of project, and fulfillment of obligations specified in the loan agreement or bond issue on a regular basis or at the request of the Ministry of Finance; and take responsibility for the accuracy and truthfulness of the information;

g) Report risks of violating loan agreement or letter of guarantee in a timely manner.

3. Relevant Ministry, ministerial-level agency, or People’s Committee of province shall:

a) Approve scheme for loan or bond issue of enterprises under its scope of management;

b) Cooperate with the Ministry of Finance in assessing the policy on issue of guarantee or sovereign guarantee;

c) Inspect and expedite guaranteed borrowers under its management to fulfill their obligations; take actions against violations committed by guaranteed borrowers;

d) Cooperate with the Ministry of Finance in settling any dispute arising from the implementation of letter of guarantee.

4. The Government shall provide guidelines for issue and management of sovereign guarantees.

Chapter VII

PROVINCIAL DEBT’S MANAGEMENT

Article 49. Purposes of provincial loans

1. Financing local budget deficit as prescribed in the Law on State Budget.

2. Repaying principal of local budget loans as prescribed in the Law on State Budget.

Article 50. Rules for provincial loans

1. A loan granted for financing local budget deficit is only used for development investment to carry out programs and projects in the mid-term public investment plan ratified by People’s Council of province.

2. The outstanding debt of a province must maintain a limit as prescribed in laws and regulations on state budget.

3. The People’s Committee of province may not apply for any external loan.

Article 51. Forms of provincial loans

1. Issuing provincial bonds in domestic capital market.

2. Receiving ODA on-lent loans or external concessional loans.

3. Applying for loans from other domestic financial sources as prescribed in laws and regulations state budget.

Article 52. Conditions for provincial loans

1. A People Committee of province which applies for a domestic loan for a project of socio-economic development eligible for funding from local budget as prescribed in the Law on State Budget must fulfill the following conditions:

a) The project has completed investment procedures as per the law and has been included in a list of mid-term public investment of province with approval of the competent authority;

b) It has a loan repayment plan according to every source of funds for investment as set forth in the Law on State Budget and the Law on Public Investment;

c) In case of raising a loan through bond issue, the scheme for issuing bonds must be made and assessed as prescribed in regulations of the Government on bond issues;

d) The amount of the loan or issued bonds is within the local budget s outstanding debt and deficit in accordance with laws and regulations on state budget.

2. A People’s Committee of province applying for ODA on-lent loan or external concessional loan must fulfill the conditions prescribed in Clause 1 Article 36 of this Law.

Article 53. Applying for and repaying provincial loans

1. A People’s Committee of province shall apply for a loan through forms prescribed in Article 51 of this Law and the following regulations:

a) In case of issuing provincial bonds in the domestic capital market, the People’s Committee of province shall make a scheme for bond issue, send it to the People’s Council of province for ratification, and then forward it to the Ministry of Finance for approval in terms of terms and conditions of bonds before the issue;

b) In case of an ODA on-lent loans or external concessional loan, the People’s Committee of province shall comply with Chapter V of this Law;

c) In case of a state fund loan, the People’s Committee of province shall submit an application for state fund loan enclosed with relevant documentation to the Ministry of Finance for decision;

d) In case of a loan from other domestic financial sources, the People’s Committee of province shall negotiate and conclude a loan agreement.

2. The People’s Committee of province shall set aside an amount in local budget or from other legitimate sources of funds as per the law to repay debt in full and on schedule.

3. The Government shall provide guidelines for provincial debt management.

Chapter VIII

CAPACITY TO REPAY PUBLIC DEBTS

Article 54. Capacity to repay public debts

1. The fund raising in form of loans must maintain indicators of public debt safety within prescribed limits and set aside amounts to repay public debts in full and on schedule.

2. A new loan only is granted after fully evaluating impacts on scope of public debts, capacity to repay debt for a mid-term period and ensuring limits on indicators of public debt safety.

3. Debts of state budget shall be repaid as follows:

a) Pay interests, charges and other expenses arising out of the debts according to the annual state budget estimates approved by the competent authority;

b) Gain revenue surplus and revenue increase as mentioned in the responding estimate, attain expenditure decrease, budget surplus and other legitimate sources of funds to repayment principals in full and on schedule;

c) The National Assembly shall ratify the new loan amount to pay off the principal to be included in the total loan of annual state budget.

4. Borrowers of guarantees and ODA on-lent loans or external concessional loans must repay debts in full and on schedule.

Article 55. Risk management of public debts

1. Risk management of public debts refers to the identification of risks faced by public debt portfolios, determination of extent of negative impacts thereof with the purpose of adopting prevention and remedial measures and ensuring the capacity to repay public debts.

2. Public debt risks include:

a) Risks of interest rates, foreign exchange rates;

b) Risks from fluctuations of financial market that affect the fund raising;

c) Liquidity risk due to lack of financial assets to be easily changed into cash to meet due debt obligations as committed, including capacity to repay public debts of central budget and local budgets;

d) Credit risk caused by failure of end borrowers or guaranteed borrowers to repay the debt in full and on schedule;

dd) Other risks likely to affect the public debt safety.

3. Preventive measures for risks faced by public debts, including:

a) Granting on-lent loans in which the intermediary borrower takes all of credit risks;

b) Request security for loans, manage collateral for loans to be on-lent and sovereign guarantees;

c) Require borrowers of sovereign guarantees, ODA on-lent loans or external concessional loans to purchase trade credit insurance;

d) Conduct active preventive transactions, including debt purchase, debt swap, use of derivatives and other transactions.

4. Responses to risks faced by public debts, including:

a) Restructuring debts according to the scheme approved by the competent authority;

b) Disposing of collateral and other assets put up as security for loans to recover debts;

c) Use debt repayment fund as prescribed in Clause 4 Article 56 of this Law and require guaranteed borrowers of sovereign guarantees to undertake to be in debt.

5. According to specific risks and impacts thereof on every loan, the Ministry of Finance shall take charge and cooperate with relevant agencies in submitting a scheme for debt restructuring to the Prime Minister for approval, including preventive measures for and responses to risks as follows:

a) Restructure domestic and external debts of the Government;

b) Assign ownership of enterprises with debt obligations to the Government;

c) Make a charge-off or write-off when an end borrower or a guaranteed borrower suffers partial or total loss of capital and assets due to force majeure events.

6. The Ministry of Finance shall restructure debts through debt purchase, debt swap, or loan deferment and report on them to the Prime Minister.

7. An end borrower or guaranteed borrower must set aside reserves to response to risks as per the law; make plans for responses to risks as deemed appropriate; and subject to inspection and supervision of competent authorities.

8. The Government shall provide guidelines for risk management transactions associated with public debts.

Article 56. Debt repayment fund

1. Debt repayment fund is established by the Government to ensure capacity to repay debts arising from loans to be on-lent and loan loss reserves arising out of on-lending and sovereign guarantees.

2. The management of debt repayment fund must meet the following requirements:

a) Ensure accurate and adequate collection and use sources of fund as prescribed in this Law;

b) Ensure liquidity, safety, maintenance and growth of the fund, raise effectiveness of the fund;

c) Do accounting and audit and make financial disclosure as per the law.

3. Revenues of the debt repayment fund comprise:

a) Debts recovered from loans to be on-lent of the Government;

b) Receipt from on-lent loan loss reserves;

c) Receipt from charges for management of on-lent loans and sovereign guarantees;

d) Funds recovered from amounts advanced from the fund;

dd) Receipt from debt restructuring and debt portfolio restructuring;

e) Deposit interests, loan interests, and receipt from sources of fund as trust services;

g) Other lawful revenues.

4. The debt repayment fund is used to:

a) Repay loans to be on-lent to state budget and external loans;

b) Advance funds for guaranteed borrowers of sovereign guarantee when they default on the debt;

c) Advance funds for debt restructuring, restructuring portfolios of government debts and sovereign-guaranteed debts according to the scheme approved by competent authority;

d) Finance expenditures on responses to risks arising from ODA on-lent loans or external concessional loans and sovereign guarantees as decided by the competent authority;

dd) Finance expenditures on public debt management transactions as decided by the Prime Minister.

5. The sources of the debt repayment fund after balancing, used for purposes prescribed in Clause 4 of this Article, are considered temporary idle funds and to be financed to the state budget when revenues of state budget have not been raised enough; deposit services; fund management trust services; or government/sovereign bond investment. The Ministry of Finance shall decide the management and use of aforementioned idle funds and ensure its maintenance and effectiveness.

6. The foreign currencies of debt repayment fund shall be guaranteed as follows:

a) The proportion of foreign currencies must be maintained in such a way that the Government must repay enough external debt service within at least a certain period in a year;

b) If the revenue in foreign currencies of the debt repayment fund is not enough to meet the expenditure on foreign currencies, the deficit shall be financed by the foreign currency fund of state budget.

7. If the debt repayment fund is not enough to repay debt service despite responses to risks in accordance with this Law, the Government shall report on revenues, expenditures, debt service, reasons for insufficient fund for debt repayment, and remedial measures to the Standing Committee of National Assembly, and then the Standing Committee of National Assembly shall forward it to the National Assembly for ratification as prescribed in laws and regulations on state budget.

8. The debt repayment fund shall do accounting in accordance with laws and regulations on accounting.

9. The Government shall provide guidelines for management of debt repayment fund.

Chapter IX

ACCOUNTING, AUDITING, STATISTICS, REPORTS AND DISCLOSURE OF INFORMATION ABOUT PUBLIC DEBTS

Article 57. Accounting of public debts

1. Any loan, debt repayment, outstanding debt of the Government, or provincial debt shall be accounted as prescribed in the Law on Accounting, the Law on State Budget and relevant law provisions.

2. End borrowers and guaranteed borrowers must do accounting as per the law and send reports to postage stamps for monitoring.

3. The Minister of Finance shall provide guidelines for accounting system associated with loans and debt repayment of the Government and provinces; release statistics on and monitor debts arising from on-lent loans and sovereign guarantees.

Article 58. Auditing of public debts

1. State Audit Office shall perform its tasks and powers as prescribed in Article 18 of this Law.

2. The manager of a program/project must enter into an audit agreement with an audit firm with the purpose of auditing annual financial statements and final investment accounts as prescribed in laws and regulations on independent audits.

Article 59. Statistics on and establishment of a database on public debts

1. The statistics on public debts must stay honest and impartial, accurate, adequate, and timely; remain free of duplication and redundancy-free; and keep transparent and comparative as per the law.

2. Apply information technology in public debt management to meet objectives and tasks of public debt state management; give priorities to researches and application of advanced tools, diagrams, and practices of debt management in accordance with international practices and standards, in conformity with socio-economic development conditions for certain periods.

3. The Ministry of Finance shall establish a single database on public debts; develop applications in public debt management.

Article 60. Reports on public debts

1. Annually or at the request, the Government shall send a report on public debts to the National Assembly, the Standing Committee of National Assembly, and the State President, at least containing:

a) Public debts and indicators of public debt safety, including outstanding debts, debt structure, creditors, borrowed currencies;

b) Implementation of borrowing and repayment plan of the Government, provinces and annual sovereign-guaranteed loan limits;

c) Negotiation and conclusion of international treaties on public debts;

d) On-lent loans, issue and management of sovereign guarantees, including projects on on-lending or sovereign guarantees that face difficulty in repaying debts and the debt repayment fund must be advanced to cover such debts, on the case-by-case basis;

dd) Management and use of debt repayment fund, including opening balance, accrual revenues and expenditures, closing balance;

e) Implementation of resolutions of the National Assembly and the Standing Committee of National Assembly on public debts;

g) Other related information.

2. Annually, Ministries and ministerial-level agencies must send a report to the Government on implementation of public debt state management as assigned by the Government.

3. Annually, People s Committees of provinces shall send reports on public debts to People s Councils of provinces, the Ministry of Finance and competent agencies, at least containing:

a) Provincial debts, including implementation of provincial borrowing and repayment plan, debt service and outstanding debt of the province;

b) Implementation of programs and projects eligible for provincial loans;

c) Management and supervision of provincial debts;

d) Other related information.

Article 61. Public debt information disclosure

1. Indicators of public debts to be disclosed comprise:

a) Government debts, including external debts listed by lenders; government debt instruments listed by instrument types;

b) Provincial debts, including provincial bonds, ODA on-lent loans, external concessional loans, loans taken out from state funds, and other loans;

c) Sovereign-guaranteed debts, including outstanding debts and advances from the debt repayment fund (if any).

2. Information about public debts under the list of state secret matters shall be provided and disclosed in accordance with laws and regulations on state secret protection.

3. The powers to disclose public debt information:

a) The Ministry of Finance shall disclose information on public debts;

b) Presidents of People’s Committees of provinces shall disclose information on provincial debts.

4. Public debt information shall be disclosed in the following forms:

a) Websites of the Ministry of Finance and the People’s Committees of provinces;

b) Press conferences, press releases;

c) Public debt newsletter.

5. Public debt newsletters shall be issued biannually by the Ministry of Finance in Vietnamese and English translation in the form of publication and data in the website of the Ministry of Finance.

6. Ministries, ministerial-level agencies, People’s Committees of provinces, intermediary borrowers, and relevant agencies shall cooperate with the Ministry of Finance in collating and confirming data of public debts and relevant matters.

Chapter X

IMPLEMENTATION ORGANIZATION

Article 62. Effect

1. This Law takes effect on July 1, 2018.

2. The Law on Public Debt Management No. 29/2009/QH12 expires from the date on which the effective date of this Law.

3. In case of any discrepancy in the regulations on the same matter between this Law, the Law on Public Investment No. 49/2014/QH13, and the Law on the State bank of Vietnam No. 46/2010/QH12, the regulation of this Law shall prevail.

Article 63. Transitional regulations

A loan agreement concluded, a debt instrument or a sovereign guarantee issued before the effective date of this Law shall be done in accordance with the Law on Public Debt Management No. 29/2009/QH12.

This Law is passed on November 23, 2017 by the 14th National Assembly of the Socialist Republic of Vietnam at its 4th session.

The President of National Assembly

Nguyen Thi Kim Ngan